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HMRC internal manual

Business Income Manual

Specific receipts: refunds of sums paid as VAT: refund accounted for by someone other than the trader who made the overpayment: post cessation receipts

This is direct tax guidance; for indirect tax guidance, refer to VAT Guidance.

A VAT group can claim refunds of sum originally paid as VAT where the trading company has ceased trading and been wound up. See BIM40171 for guidance on VAT groups generally.

If the refund is received simply as a sum due to the trader after the trade has ceased, then it is taxable as a post cessation receipt. The charge on post cessation receipts is not restricted to sums received by the trader and also applies to such receipts received by other people, see BIM90000 onwards.

The refund of a sum, that would not have been taxable on the trader, is not taxable under the post cessation receipts legislation. Such sums include refunds of expenditure originally disallowed as a trading expense for direct tax purposes either because it was a capital payment or it was a payment disallowed by statute (for example, overseas entertaining expenditure).


A Ltd, B Ltd and C Ltd were car dealerships in the MNO VAT group.

In 2008, the directors of M Plc decided to rationalise their operations, as a result the trade of A Ltd was hived up into M Plc, whilst B Ltd and C Ltd ceased trading. B Ld and C Ltd were subsequently dissolved.

N Ltd, the current representative member, subsequently made claims for refunds of sums wrongly paid as VAT. In doing so N Ltd was acting on behalf of the MNO VAT group as a whole.

HMRC agreed the claim, and the refund was accounted for by N Ltd, acting as representative member for the MNO VAT group.

The receipt in respect of A Ltd was recognised in the accounts of M Plc as the trade of A Ltd had become part of the trade of M Plc.

The directors of M Plc decide to recognise the refunds in respect of B Ltd and C Ltd, which were wound up, in the accounts of M Plc.

The refund in respect of A Ltd is a receipt from the trade carried on by M Plc and is taxable as a trading receipt.

The refunds in respect of B Ltd and C Ltd are post cessation receipts of those companies’ trades. M Plc is taxable on these refunds under the post cessation receipts legislation. M Plc has received the refunds and is entitled to them as a result of the VAT legislation.